The extension of unsecured credit by banks, credit card issuers and merchants has created an explosion of secured and unsecured consumer debt. Many consumers are indebted well-beyond their ability to pay their debts and, as a result, account balances and even the so-called minimum payments due on their credit accounts become overdue or “delinquent.”
Creditors attempt to collect overdue balances and overdue payments using a variety of techniques, also referred to herein as debt collection “strategies.” Debt collection strategies can include written correspondence, such as a letter, phone calls, personal visits, negotiations for payment extensions, interest rate adjustments, threats of litigation as well as a combination thereof. By way of example, letters are often followed by telephone calls. Telephone calls may be scheduled for a certain time of day. Whether a communication with a debtor is written or oral, it will comprise a message, which may be threatening or conciliatory. The communication with the debtor is such that payment options may (or may not) be offered, providing varying degrees of flexibility to the debtor to provide payment on the past due account. The contact with the debtor may be handled by collections personnel who are highly trained, experienced employees with excellent negotiating skills, or by relatively inexperienced collectors, with less developed skills. The combination of these and other elements of customer interaction comprise a treatment (also known as a “collection strategy”) and each debt collection strategy is intended to yield a result.
The process of debt collection has become sophisticated. Whether a debtor is threatened or consoled, debt collection processes are preferably tailored to a particular debtor reflecting the fact that different people will react differently to the same message or offer. In order to maximize collection efforts, different people should be treated differently, but appropriately for their particular circumstances.
FIG. 1 depicts a simplified representation of a prior art debt collection process 100. Extrinsic or external payment data 102, which is typically collected by and available from third party debt collection data services such as Equifax, Inc., Experian Inc. and others, and includes debtor data such as income, debt-to-income ratio, other creditors and a “credit score” which is usually a dimensionless index calculated by the third party credit reporting agency using a proprietary formula to attempt to rate or grade the credit worthiness of the debtor.
In addition to external data 102, prior art debt collection processes used by many creditors also use internal data 104, which is data on a particular debtor that is collected by a creditor. Internal data 104 typically includes the creditor's payment history, his purchase history and contact history. The payment history 106 typically includes the historical timeliness of required loan or installment payments by a creditor. Payment history data 106 can be valuable in collecting debt if the payment history data 106 shows that a particular debtor is either habitually late or delinquent in making payments, or consistently makes payments on time. Payment history data 106 can be a good indicator of future payment likelihood.
Purchase-history data 108 typically includes data of the business relationship with the debtor over time. A long-time customer evidenced by purchase-history data 108 might be treated differently than a new customer. Accordingly, purchase-history data 108 is frequently considered during a debt collection effort.
Among other things, the external data 102 and internal data 104 for each debtor can be used to classify or characterize a debtor and/or the debtor's ability to pay off a debt. Such data can also be used to select a debt collection strategy likely to be successful with the debtor.
A contact history or record 110 is typically a record of the substance of communications to and from a debtor. Contact history data 110 wherein previous conversations with or correspondence from a debtor contain debtor represent that payments will be forthcoming but which subsequently prove to be false, can be helpful in determining how to collect an existing debt.
A raw credit score 112 is typically a dimensionless index that is calculated using a creditor-proprietary formula or methodology, the resultant numerical value of which provides some sort of measure of the debtor's credit worthiness. A credit score is based upon historical data and relies upon historical data as a predictor of future payment likelihood. Contact history and credit score can also be used to characterize or classify a debtor and/or the debtor's ability to pay off a debt.
In prior art debt collection processes, data that includes the external data 102 and internal data 104 are analyzed alone or in combination, in step 120 in order to determine a risk profile 122 as well as a model of the debtor's behavior 124. The task of collecting all or part of debt is assigned to a debt collector in step 130 based upon the risk profile 122 and behavior model 124 of the debtor.
A problem with prior art debt collection techniques is that they rely upon individual collectors to assimilate this complex array of information and to form judgments as to the most appropriate negotiating strategies or treatment for the customer, very typically in a very short time frame while the collector is engaged in conversation with the customer. In addition, as the customer provides additional information to the collector relative to the customer's financial circumstances or willingness to pay, the collector is expected to immediately reassess treatment strategies, messages to deliver and negotiation tactics. As indicated above, some collectors are highly trained professionals, and better able to perform these complex assessments, while others are newer to the job, and less able to make these assessments.
A method by which a creditor can ascertain the treatment that is most likely to persuade a debtor to make a payment on outstanding debt, to adapt said treatments based on real-time interaction with the customer to maximize the probability of successful negotiation, and to consistently and systematically apply the assessment of treatment strategies relative to the customer across all debt collection interactions, thereby reducing the number of required contacts and the amount of debt charged off, would provide a significant improvement over the prior art.
As disclosed above, the terms “strategy” and “collection strategy” refer to techniques used to collect a debt. Collection strategies can include, but are not limited to, a specification or directive as to when and/or how often a debt collector should contact a debtor, how a debtor should be contacted, e.g., by phone, by mail, in person, whether the delinquent debt payment should be negotiated or perhaps an offer to settle a debt or extend a repayment schedule should be made, and/or the tone and demeanor of the discussion.
Those of skill in the art will recognize that attempting debt collection using a collection strategy based upon only historical data has limitations. If the personal circumstances of a debtor have changed since the information about the debtor was last collected, the selected debt collection strategy might not be appropriate. A method for adjusting a debt collection strategy in real time to accommodate the changing circumstances of a debtor would be an improvement over the prior art.